Growth through acquisition can bring new customers, capabilities and people into a business. It can also leave employers managing several separate employee benefit schemes across different companies.
Each scheme may have its own insurer, renewal date, benefit structure, eligibility rules and administration process. Over time, this can increase costs, create additional work for HR and finance teams, and result in employees across the same group receiving different levels of support.
For acquisitive businesses and corporate groups, reviewing whether these arrangements can be consolidated may uncover opportunities to simplify administration, improve consistency and potentially reduce costs.
The potential benefits of consolidation
Bringing separate schemes together can offer several advantages.
A larger combined membership may strengthen an employer’s buying position and provide access to more competitive terms. It may also reduce duplicated work by allowing the business to manage fewer renewal dates, invoices, insurer relationships and membership records.
Depending on the schemes involved, consolidation could help an employer:
- Reduce duplication and administrative work
- Bring renewal dates and payment arrangements together
- Create greater consistency across the wider workforce
- Improve oversight of costs, cover and employee engagement
- Make benefits easier to communicate and access
- Strengthen its position when approaching insurers
However, a larger scheme will not automatically mean lower premiums. Insurers may consider factors including workforce demographics, occupations, claims history, locations, benefit levels and eligibility when setting their terms.
The right outcome is therefore not necessarily to place every employee into one identical arrangement. It is to establish whether the current structure remains suitable and whether greater alignment could deliver better value.
Can different companies join the same scheme?
Consolidation is not limited to situations where one company has been fully absorbed into another.
In some circumstances, businesses within the same corporate group may be able to participate in a shared arrangement as associated employers. This could allow a parent company to oversee benefits for several subsidiaries through a more coordinated structure.
Whether this is possible will depend on the ownership arrangements, the type of benefit, the insurer’s requirements and the terms of the existing schemes. An Employee Benefits adviser can review the structure and approach insurers to establish what options are available.
What needs to be considered following an acquisition?
Employee benefits should form part of the planning for any acquisition or business transfer.
Where the Transfer of Undertakings (Protection of Employment) Regulations, commonly known as TUPE, apply, employees will usually transfer to the new employer with their continuity of employment and most existing employment terms protected.
Employers should establish whether benefits are contractual or discretionary and understand what has previously been promised to employees before making changes. Pension arrangements also require separate consideration, as they are treated differently from many other employee benefits under TUPE.
This means benefit schemes should not be consolidated without first reviewing:
- Employment contracts and benefit entitlements
- Existing policy terms and cancellation provisions
- Differences in cover and eligibility
- Insurer requirements and underwriting
- Free cover limits and any medical evidence requirements
- Claims already in progress
- Employee consultation and communication
- Workplace pension obligations
- The most appropriate date for any change
Legal, HR and pensions advice may also be required alongside guidance from an Employee Benefits adviser.
Where does novation fit in?
Novation may be relevant where responsibility for an existing policy or agreement needs to move from one legal entity to another.
In some cases, an insurer may agree to a straightforward change of policyholder. In others, a new scheme or a more detailed transfer process may be required. The approach will depend on the insurer, the policy terms and the structure of the transaction.
What appears to be a simple administrative change can have wider implications for cover, underwriting and employees’ contractual entitlements, so it is important to understand the full position before proceeding.
Start with a review
Consolidation can offer meaningful financial and administrative benefits, but it should begin with a review rather than an assumption that one scheme will always be better.
An Employee Benefits adviser can help the business map its existing arrangements, identify inconsistencies and duplication, compare the available options and approach insurers for terms. They can also help coordinate implementation and communicate any agreed changes to employees.
For businesses that have grown through acquisition, or corporate groups managing several benefit schemes, this review may reveal opportunities that have previously gone unnoticed.
If you would like to explore whether consolidating your employee benefits could save time, improve consistency or deliver better value, contact the Clear Employee Benefits team.
